Life Insurance Or Critical Illness Cover?
Protecting your family for the future is always a parent’s key role in creating a safe and secure environment. Part of the protection provided by parents for their children also includes creating a long-term financial safety net. Many parents will either choose Life Insurance or Critical Illness Cover or a combination of both. By failing to protect your family’s long term future and well being if you were unable to work . Or in the worst case scenario, you were no longer around could have a considerable financial impact in addition to the emotional distress.
Life Insurance and Critical Illness Cover do offer significant peace of mind, knowing if something unexpected does happen to you, both types of policy will protect you against very different risks.
In today’s post we look into the key differences between Life Insurance and Critical Illness Cover:
Is Life Insurance The Same As Critical Illness Cover?
What Are The Differences Between Them?
Can I Have Both Life Insurance And Critical Illness Cover?
Once you have gone through today's guide and may want to find out more details about Life Insurance or Critical Illness Cover, either simply head to our extensive guide section. Or send a question to us via the comments, email or social media.
Is Life Insurance The Same As Critical Illness Cover?
Yes they are both the same in that they are protection policies, but Life Insurance or Critical Illness Cover are not the same thing.
Before we look at the key differences between Life Insurance and Critical Illness, it is worth looking into how similar they are:
Both are designed to protect against the risk of financial loss if an unexpected event occurs.
Both policy types will either make a one time payment on the policy or a monthly payment, depending on the policy type you choose.
All new applications for protection policies are subject to medical underwriting before they can be approved. Each individual applying for a policy will be asked a few questions including age, gender, health, lifestyle and occupation.
Neither Life Insurance or Critical Illness have restrictions or guidelines for what a claim payment can be used. These decisions are either for the family (Life Insurance) or for the policyholder (Critical Illness Cover).
What Are The Differences Between Them?
Primarily the key difference between the both policy types is the circumstances which each type of Insurance would make a claim payment.
A Life Insurance policy would make a payment to your family if you were to pass away, either during the term of the policy (Level Term, Decreasing Term) or with a Whole of Life policy at any age you may pass away. A payment can either be made as a lump sum or a monthly payment to your family. Critical illness cover will also make a payment but to the policyholder instead. A payment will only be made after you receive a diagnosis of a serious illness, disability or medical condition as outlined within the policy guidelines.
Life Insurance Protection
A Life Insurance protection policy is the most straightforward of the two policy types. If a policyholder dies during the term of the policy as detailed above. Then a claim can be made against the policy for the sum assured to be paid out. There are only a few circumstances where a claim might be declined:
Death Due To Suicide: Almost all Insurance providers will exclude protection for the first 12 months of a policy.
Death Due To: A direct involvement in a criminal activity
Non Disclosure: If you do not declare an existing condition when you take out a policy during the application process. An insurer may decide to withhold a claim payment.
Visiting a Foreign Country: If a death occurs when visiting a foreign country outside those listed as acceptable in the policy terms and conditions. However this usually only applies to countries deemed hazardous.
Critical Illness Cover Protection
A Critical Illness Cover policy is not quite as inclusive as a Life Insurance policy. This is because a claim payment would only be made once the policyholder is diagnosed with a specific illness as detailed within the policy documentation.
Because all insurance companies offer slightly different policies, each provider will have specific list of what would be defined as a Critical Illness. Almost all insurers will provide protection for:
Heart Attack
Stroke
Cancer
Not all insurers will cover every medical condition or how often an illness may occur. It is very important to read through all of the policy documents to make sure you have the right level of cover. If you are unsure of what may not be covered or would like more information, our detailed guide on Critical Illness may help.
Many Insurance providers will offer protection for other conditions within their policies which may include:
Total permanent disability
Loss of speech
Liver or kidney failure
Coronary artery bypass surgery
Loss of limbs
Multiple sclerosis
Alzheimer’s
Loss of sight or hearing
Motor neuron disease
Serious brain injury
Third degree burns
Paralysis
Diabetes
More Differences Between Life Insurance Or Critical Illness Cover:
The Type Of Financial Loss Each Policy Would Protect Against
The Type Of Financial Loss Each Policy Would Protect Against
The main aim of a Life Insurance policy is to protect your family and loved ones financially in the event of your death. Many different policies offer the option to link the sum assured to a particular multiple of your annual salary.
So for example if a new policyholder had a salary of £30,000 per year and they purchased a sum assured amount of £250,000. This would provide over 8 years worth of your income. Which could also be used to help cover all your potential funeral costs.
Another use for a Life protection policy could be to repay in full any outstanding debts, the obvious one being the mortgage on your family home. Or another alternative could be to leave a financial safety net for your family and loved ones.
Or Critical Illness Cover could be used to cover loss of your income and any current outstanding debts whilst you get better. This policy type is also known as a "living benefit" because it helps the policyholder during their lifetime. It is often used to aid with any additional medical treatment you may need to aid your recovery, including modifications to your family home if required.
Who Would Receive The Claim Payment In The Event Of A Claim
With a Life Insurance policy, a claim would be made by your family, loved ones or named beneficiaries. They will then have the discretion on how the money would be dispersed. A policyholder can allocate specific percentages across a number of beneficiaries, if they so choose to do so.
Because a Critical Illness Cover policy would pay out while the policyholder is alive. They will have full control over how the money is used in order to aid their recovery. The only caveat to this, could be if the person is unable to make decisions for themselves or someone has a power of attorney.
When This Protection Policy Could Be Most Needed
If you’re single with no dependents, beyond making sure you have adequate cover for funeral expenses, life cover is not as much of a necessity versus critical illness cover. For the former, there would still be a very clear need to ensure you have sufficient funds to help you with your recovery..
If you’d like to know more about the difference between life Insurance and critical illness cover and how this relates to your own personal circumstances make an online enquiry and we can arrange for one of our advisors to get in touch.
Can I Have Both Life Insurance And Critical Illness Cover?
Yes, it is an individuals choice to have either Life Insurance or Critical Illness Cover and no to policies are the same. It can sometimes create a common misunderstanding that both types of protection are somehow competing against each other. The reality is detailed within this post, as they are both two separate types of protection.
Also many insurers that Life Insurance Cover searches will offer combined cover of the two types. A combined policy does offer a more comprehensive level of insurance protection. There are limitations to a combined policy as detailed within our many guides on protection.
If you’d like to know more about the range of many different types of policies available. Which offers both life and Critical Illness Cover, feel free to get a free no obligation quote today.